The Student Room Group

A level economics

Struggling here to find points to work on.. this is what I written so far !

Technological progress is defined as an improvement to the efficiency and quality of the production of a good or service. In the extracts the mention of robots supports the theory of technological improvement. However, the purchasing of machinery could lead to an increase in unemployment in the labour industry however some economist might argue that it creates new ones. In this essay I will debate the impact of free market versus government intervention of the increased investment of robots focusing on the impacts on the labour market.

In a free market, the demand for goods and services determines how much is produced this is explained using the “invisible hand” hypothesis where the allocation of recourses is driven by functions such as incentives, signalling and rationing. The improvement of technology through the investment in robots can increase economic growth which can been seen as a positive to consumers, producer, and the government. This is due to an increase in the quality and quantity of the goods and services provided consumers may benefit from this in an increase in welfare and utility. Employment of robots could lead to reduction in average cost for firms as more output is produced in a given time period. From this you could imply that firms benefit in the short run from an increase in profit however this depends on if the good or service being produce is price elastic as the firm would see a higher % increase in profit than if it was price inelastic. We can show these changes on an supply and demand diagram where SUPPLY shifts to the right as cost of production would have decreased this causes price to decrease from P1 to P2. This will benefit consumers from a lower price level causing them to have a higher disposable income and therefore inject into the economy. Opposingly the firm might wish to maximise profits even further by letting go workers who are not as fast and efficient than the robots. This creates the multiplier effects as if unemployment rises the government might have to allocates benefits casing spending to increase and therefore is costly to the UK’s relative economic position. The unemployed workers may suffer from structural unemployment and lack the skills required for other jobs in the economy resulting in long term benefits claims.




Employing more robots causes negative externalities of production to the environment. Illustrated by this graph the MSC shifts to the left resulting in a price increase and a dead welfare loss shown by the shaded region. Therefore, the marginal propensity to consume the good or service will decline, and the utility will do the same. This could be seen as a market failure and government intervention is needed to counteract the challenges faced. In the extract it mentions “UBI payment” to offset the welfare loss, which in the long run could lead to lower unemployment as citizens could develop new skills in different sectors to reduce structural unemployment but this depends on the likeliness of the consumer to spend it effectively. Mentioned in the extract it is available to all in society not only will this be costly to the government perhaps creating a budget defect it could also create higher inequality as those on higher income could increase their wealth by buying property or investing. There is always an opportunity cost in this as the money spent on supplying the grant could be spent on other sectors like education to further influence employment in the long run.




In a free market there is no protectionist policies towards the labour sector resulting in employers issuing lower wages and bad working conditions - this is due to the objectives of firms which is to maximise profits.
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